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Glossary Of Common Health Insurance Terms.
By: Patrick Mansfield | U.S. Health Alerts


Health insurance terms are complex and understanding what they mean and how they apply to healthcare costs can be confusing. Since not all insurance policies use insurance terms, in the same way, reading an insurance policy can be a challenging exercise for the most intelligent people.

Consumers purchase health insurance from a health insurance company in exchange for monthly, quarterly, or annual premium costs. Understanding insurance terminology can help consumers select the best choices in the Health Insurance Marketplace.

Filing an insurance claim or comparing insurance policies often use these unfamiliar terms. The most commonly used insurance terms include:
  • Deductible, or how much the insured pays before policy coverage kicks in. Higher deductibles often correlate with lower insurance premium costs.
  • Co-insurance, such as an 80/20 policy, means that after hitting the policy deductible, the insured pays 20 percent of the costs.
  • Out of pocket limits refer to the money the insured must pay before he or she stops losing money. The out-of-pocket limit is sometimes referred to as the policy stop loss.
Here is a short list of other frequently used insurance terms:
  • The allowed amount is the maximum total upon which covered health care services are based. It may also be called the negotiated rate, eligible expense, or payment allowance. When a provider charges a higher rate than the insurance policy allows, the insured pays the difference.
  • Many people grapple with the concept of co-payments. A copayment is a fixed dollar amount for a health care service covered by an insurance policy. If the insured’s copayment is $10, he or she typically pays this amount at the time of service. Co-payments for medicines can vary. Brand name drugs co-pays are typically higher than co-pays for generic medicines.
  • Emergency room care includes services received when the insured goes to the hospital emergency room. In contrast, emergency services refer to physicians’ evaluation of a serious emergency medical condition and treatments provided to prevent a worsening condition. In comparison, urgent care refers to the treatment of illness or injuries that are serious but not as severe as those requiring the patient to go to the emergency room.
  •  Excluded services are those items that the insured’s health insurance policy does not pay for.
  • Habilitation (rehab) services refer to healthcare services provided to maintain the patient’s ability to function in daily life. He or she may also learn and/or improve existing skills while receiving habilitation services. Some habilitation services include speech/language pathology, physical or occupational therapy. Patients receive habilitation services in both inpatient and outpatient settings.
  • Home health care allows the patient to receive some health care services at home.Certified nurse aides (CNAs) or itinerant nurses provide home health care services. Some patients choose home health care when recovering from an illness or surgery, after childbirth, or as part of managing a chronic, long-term medical or mental condition. Home health care is available 24 hours a day, seven days a week. Not all health insurance plans cover these services.
  • Hospitalization refers to health care services delivered in an inpatient setting. Hospitalization typically requires the patient to stay one or more nights in the hospital. Sometimes, the patient receives hospitalization after an outpatient procedure. This form of hospitalization is called an observation stay. In contrast, outpatient care is services offered in the hospital that does not require the patient to stay overnight.
  • Preauthorization is frequently discussed when the physician orders medically necessary tests, prescription drugs, treatments, or equipment. The physician’s office must obtain preauthorization from the insured’s health insurance provider as outlined by the insurance plan. Although many people believe that preauthorization is the insurance company’s promise to pay, this is not so. Preauthorization is also known as prior authorization, precertification,</i> or prior approval. Preauthorization is usually unnecessary in emergency situations.
  • Preferred provider refers to providers who contract with the patient’s insurer or health plan to provide health care services at a discount. Some policies allow patients to see the complete list of preferred providers. In comparison, participating providers also agree to offer services to the insurer or health plan but may not offer the highest discount rates. In this scenario, the patient can use participating provider services but will usually pay more for them.
  •  Primary care physician is the patient’s primary physician who coordinates specialist services if necessary for the patient. He or she directly offers health care services, such as physicals, pap smears, etc. The primary care physician, also known as the primary care provider is typically a medical doctor (MD) or doctor of osteopathic medicine (DO).
  • UCR refers to “usual, customary, and reasonable” care fees for services in a certain geographic area. UCR costs are based on the amount area providers often charge for identical or similar health care services. UCR is sometimes part of the insurer’s determination of allowed amount.

The Patient Protection and Affordable Care Act and the Health Insurance Marketplace make health insurance coverage possible for every American. Basic insurance terms like those above give consumers a head start in comparing plans and choosing the one that works best for them.
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